Real Estate Investments for a Secure Future

Monthly Archives: February 2013

What kind of reading material is on your coffee table? Or do you not have enough time to read with all the television that you watch? OK, so what kind of programs are you watching on television? The sad truth is that most people spend more time being mindlessly entertained than they do developing their skills and learning their craft.

So why is it not good? It is not good because it is not yet a reality! A dream is no good if it is only a dream. Sure a dream can make you feel good, but long term, if you don’t pursue it and make it a reality, it will cause you frustration more than anything. But there is hope!

So what are you doing right now to further your education in what you’re passionate about? Are you waiting for the right opportunity to come knocking before you will develop the skills you will need for it? Get ready now! The more information you have, the more advantage you have over the people who don’t. Reading for just one hour a day will greatly increase your level of success! There are so many things to read to develop your mind, from finance to psychology, from economics to business writing, from health to computers. For one hour a day you could be studying the wide array of subjects that can help you live successfully.

Successful people did not wait for someone to call on them to be an expert before they gathered all the knowledge they could about their specialty. They were ready when the opportunities presented themselves. Spend your time reading and learning, too. Read biographies and autobiographies to study the ways of other successful people. Read often, review what you’ve read, and apply at least one thing from what you’ve learned.

Attend conferences, trade shows, training seminars and success rallies. Remember to be teachable! You can’t learn a thing if you think you already know it all. Just allow yourself to let go of needing to be right and looking smart. Listen to those who have achieved success. Open yourself up to letting others help you create new ways of thinking. After all, you can try something out and if it doesn’t work for you, you can discard it.

Find out what you need to know and learn in order to be ready for your opportunity. Start now! Make a list of things you could be doing to prepare yourself. Do you need to take a class in your spare time? Do you need to ask your boss what it will take to get to the next level? Do you need to research the market to find out how to break into it? Will you need to gather a library of good reference materials? Tackle your list!

And when you are successful, don’t stop your learning habits. Keep up with your industry. Keep making improvements. Keep studying the masters. Be powerful by being as knowledgeable as you can be, by learning news ways to do things, and by being more effective and efficient in your life.

The more you know about your passion, the more money you will make doing it. The more you learn in advance, the better your chances of landing the opportunity when it comes to you, and the better your chances of creating the opportunity for yourself!

The Big Easy continues to sport strong fundamentals and is becoming an incubator for the leisure and hospitality sector, having added 4,000 new positions in 2012. The local population expanded 1.6 percent during the same time, strengthening demand for both housing sectors and providing developers with a level of confidence that will bring nearly 1,000 new units to the metro by 2014.

In the meantime, vacancies continue to plunge across the MSA, with the overall average falling 90 points to 7.3 percent over the last four quarters. This rate stood at nearly 12 percent in 2009, falling precipitously over the next few years and now expected to hit 6.1% by the end of 2013 and 5.8% the year after.

Such consistent trends in occupancy led to a notable 2 percent rise in asking rents between 2011 and 2012—to $899 per month. Concessions also fell 90 basis points to 3.3 percent of asking rents.

Going forward, strong economic performance is expected to remain the norm as projects such as the expansion of Boomtown Casino and construction of the University Medical Center take shape. Once finished, the new casino will permanently employ around 750 staff members. The new research and teaching hospital comes as a result of legislators approving $1.1 billion in funds.

Overall payrolls are expected to increase by 1 percent, or 5,500 new positions, over the next four quarters.

Source: Hendricks & Berkadia

In tandem with new construction, permitting activity is expected to surge over the next two years, with 1,050 annualized permits expected for 2013 and 1,020 expected in 2014. Even with new deliveries and an expanding pipeline, however, rents will continue to climb 2.4 percent this year to an average of $921 per month.

The best performing submarket in terms of rents continues to be the historic city center with a 2012 average of $1,211 per month, while the River Ridge/East Bank area sported the lowest average vacancy—of 3.9 percent.

The eastern part of the city around the Ninth Ward, however, continues to see extremely high vacancies near 15 percent and rents averaging $713 per month. This part of New Orleans was severely damaged during Hurricane Katrina in 2005.

San Diego—Mortgage originations for commercial properties will increase by 11 percent in 2013, the Mortgage Bankers Association (MBA) forecasted. The market share of multifamily financing may tick down this year as capital supply to the other commercial real estate sectors make a comeback.

“Our forecast anticipates Fannie Mae, Freddie Mac and FHA, as well as life insurance companies, will all continue to have strong appetites for making loans, and—coupled with growth in originations for CMBS—the total market will continue to expand,” stated Jamie Woodwell, MBA’s vice president of Commercial Real Estate Research, in a press release.

At a press briefing during the conference, Woodwell predicted that multifamily financing will total about $105 billion in 2012. This financing volume far outstripped expectation, as only $77 billion was originally forecasted for the multifamily sector for the year.

Multifamily financing volume may experience a slight shrinking in 2013 and subsequent years to “a more traditional size” relative to the overall commercial property mortgage market, said Woodwell, during a press briefing held at the conference. Woodwell said multifamily financing had seen its share of the overall commercial property financing market increase due to funding availability and multifamily fundamentals. In 2012, multifamily financing was 46 percent of total commercial property mortgage financing. As mortgage funding for the other sectors are returning a little more strongly, however, “we’ll see more of that traditional balance” between the multifamily and commercial property market shares, said Woodwell.

MBA forecasts GDP to increase to 2.0 in 2013 from 1.8 percent last year, while unemployment rate will fall to 7.6 percent, compared to 8.1 percent for 2012. MBA said the 10-year Treasury yield will rise slightly from 1.8 percent in 2012 to 2.2 percent for 2013. However, actions by the Fed, on which a large part of the interest rate prediction is predicated, could be unpredictable, noted Jay Brinkmann, chief economist and senior vice president of Research and Education.

By investor type, the dollar volume of loans in the fourth quarter compared to the same period in 2011 rose by 228 percent for CMBS, 68 percent for commercial bank portfolio loans, 51 percent for GSEs and 18 percent for life insurance companies.

When it comes to the customer experience are you ready to put your money where your mouth is or will you simply pay lip service to the idea? Do you really understand the value of a better customer experience for your employees and residents?

Apartment Residents and the Experience Economy

81% of consumers surveyed said they are willing to pay more for a superior customer experience

44% are willing to pay a premium of more than 5%

Customer experience is now a key driver for revenue growth and an effective channel for brand differentiation

Welcome to the Experience Economy; where customers—your residents—expect more, will tell you more, and are willing to pay more for your apartments and services if you get it right! If you don’t get it right, they are also more than willing to switch to your competitor.

Now does my original question make sense?

Do you employ Apartment Manager Customer Experience Leaders?

If you don’t have the right kind of people running your multi-million dollar apartment communities, it will be difficult to deliver a great customer experience.

Transform the Customer Experience with Great Leadership

While many property management companies are chasing their tails trying to overcome negative customer experiences and customer reviews, some are also proactively focusing on what just might be at the root of the problem—“The Boss.” Yes, the title of Property Manager sometimes causes people to lose sight of their most important job—leading and inspiring people.

Research shows that a well-designed and led customer experience can trigger emotions that have a positive effect on resident retention and loyalty—inside and out.

A great customer experience begins with great leadership.

In his book On Becoming a Leader, Warren Bennis writes about the differences between a leader and a manager. Here are three key differentiators from the book,

The leader innovates; the manager administers

The leader inspires trust; the manager relies on control

The leader asks “what” and “why”; the manager asks “how” and “when”

The best Property Managers are also Customer Experience leaders. They leverage their experience, credibility, and relationships to influence positive change. These are the people who can drive the kind of cultural change that will radically affect the competitive position and performance of the community they run.

When it comes to negative customer feedback, don’t settle for simply improving a few customer-facing business processes or merely eliminating a few common causes of resident complaints. Be proactive and get to the root of the problem. Using tools such as 360-degree employee surveys, apartment reviews, apartment mystery shops, and resident surveys can be very revealing.

Can you really afford not to?

The Property Employee Experience Impacts Resident Experience

It’s silly to think that the on-site employee experience wouldn’t have an impact on resident experience. The best customer experiences are often based on mutual self-interest between on-site employees and residents. Similarly, the best employee experiences are often based on mutual self- interest between the needs of a manager/leader and on-site employees.

Which category of employee do you think will provide the best and most consistent customer experience?

We’re glad to have you with our Company. Our number one goal is to provide outstanding customer service. Set both your personal and professional goals high. We have great confidence in your ability to achieve them.

Nordstrom Rules: Rule #1: Use best judgment in all situations. There will be no additional rules.

Please feel free to ask your department manager, store manager, or division general manager any question at any time.

“Using one’s best judgment” remains Nordstrom employees’ number one policy in all aspects of the job. Has the Nordstrom employee experience impacted performance? You bet! The company was named yet again in 2012 to Fortune’s 100 Best Companies to Work For.

Three Ways to Become a Great Leader and Transform the Resident Experience

LISTEN to what their internal and external customers are saying and then they act on the information. They don’t expect to always receive positive feedback.

KNOW WHEN TO GET INVOLVED. They understand that their involvement might not always make them popular, but they are always focused on what is best for the team and the company.

KNOW THE TYPE OF FEEDBACK THAT RESONATES WITH EACH EMPLOYEE. They are also open to their own constructive feedback (surveys) from their supervisor, peers, subordinates and external customers.

Great leaders aim to build teams that believe and perform during prosperous and difficult times. They understand that if they can inspire their employees, then their employees will inspire their customers. The result can be one great customer experience after another!

Perseverance is about as important to achievement as gasoline is to driving a car. Sure, there will be times when you feel like you’re spinning your wheels, but you’ll always get out of the rut with genuine perseverance. Without it, you won’t even be able to start your engine.

The opposite of perseverance is procrastination. Perseverance means you never quit. Procrastination usually means you never get started, although the inability to finish something is also a form of procrastination.

Ask people why they procrastinate and you’ll often hear something like this: “I’m a perfectionist. Everything has to be just right before I can get down to work. No distractions, not too much noise, no telephone calls interrupting me, and of course I have to be feeling well physically, too. I can’t work when I have a headache.” The other end of procrastination—being unable to finish—also has a perfectionist explanation: “I’m just never satisfied. I’m my own harshest critic. If all the i’s aren’t dotted and all the t’s aren’t crossed, I just can’t consider that I’m done. That’s just the way I am, and I’ll probably never change.”

Do you see what’s going on here? A fault is being turned into a virtue. The perfectionist is saying that his standards are just too high for this world. This fault-into-virtue syndrome is a common defense when people are called upon to discuss their weaknesses, but in the end it’s just a very pious kind of excuse making. It certainly doesn’t have anything to do with what’s really behind procrastination.

Remember, the basis of procrastination could be fear of failure. That’s what perfectionism really is, once you take a hard look at it. What’s the difference whether you’re afraid of being less than perfect or afraid of anything else? You’re still paralyzed by fear. What’s the difference whether you never start or never finish? You’re still stuck. You’re still going nowhere. You’re still overwhelmed by whatever task is before you. You’re still allowing yourself to be dominated by a negative vision of the future in which you see yourself being criticized, laughed at, punished, or ridden out of town on a rail. Of course, this negative vision of the future is really a mechanism that allows you to do nothing. It’s a very convenient mental tool.

I’m going to tell you how to overcome procrastination. I’m going to show you how to turn procrastination into perseverance, and if you do what I suggest, the process will be virtually painless. It involves using two very powerful principles that foster productivity and perseverance instead of passivity and procrastination.

The first principle is: break it down.

No matter what you’re trying to accomplish, whether it’s writing a book, climbing a mountain, or painting a house, the key to achievement is your ability to break down the task into manageable pieces and knock them off one at one time. Focus on accomplishing what’s right in front of you at this moment. Ignore what’s off in the distance someplace. Substitute real-time positive thinking for negative future visualization. That’s the first all-important technique for bringing an end to procrastination.

Suppose I were to ask you if you could write a four-hundred-page novel. If you’re like most people, that would sound like an impossible task. But suppose I ask you a different question. Suppose I ask if you can write a page and a quarter a day for one year. Do you think you could do it? Now the task is starting to seem more manageable. We’re breaking down the four-hundred-page book into bite-size pieces. Even so, I suspect many people would still find the prospect intimidating. Do you know why? Writing a page and a quarter may not seem so bad, but you’re being asked to look ahead one whole year. When people start to do look that far ahead, many of them automatically go into a negative mode. So let me formulate the idea of writing a book in yet another way. Let me break it down even more.

Suppose I were to ask you, Can you fill up a page and a quarter with words—not for a year, not for a month, not even for a week, but just today? Don’t look any further ahead than that. I believe most people would confidently declare that they could accomplish that. Of course, these would be the same people who feel totally incapable of writing a whole book.

If I said the same thing to those people tomorrow–if I told them, I don’t want you to look back, and I don’t want you to look ahead, I just want you to fill up a page and a quarter this very day–do you think they could do it?

One day at a time. We’ve all heard that phrase. That’s what we’re doing here. We’re breaking down the time required for a major task into one–day segments, and we’re breaking down the work involved in writing a four-hundred-page book into page-and-a-quarter increments.

Keep this up for one year, and you’ll write the book. Discipline yourself to look neither forward nor backward, and you can accomplish things you never thought you could possibly do. And it all begins with those three words: break it down.

The second principle is: write it down.

My second technique for defeating procrastination is also only three words long. The three words are: write it down. We know how important writing is to goal setting. The writing you’ll do for beating procrastination is very similar. Instead of focusing on the future, however, you’re now going to be writing about the present just as you experience it every day. Instead of describing the things you want to do or the places you want to go, you’re going to describe what you actually do with your time, and you’re going to keep a written record of the places you actually go.

In other words, you’re going to keep a diary of your activities. And you’re going to be amazed by the distractions, detours, and downright wastes of time you engage in during the course of a day. All of these get in the way of achieving your goals. For many people, it’s almost like they planned it that way, and maybe at some unconscious level they did. The great thing about keeping a time diary is that it brings all this out in the open. It forces you to see what you’re actually doing… and what you’re not doing.

The time diary doesn’t have to be anything elaborate. Just buy a little spiral notebook that you can easily carry in your pocket. When you go to lunch, when you drive across town, when you go to the dry cleaners, when you spend some time shooting the breeze at the copying machine, make a quick note of the time you began the activity and the time it ends. Try to make this notation as soon as possible; if it’s inconvenient to do it immediately, you can do it later. But you should make an entry in your time diary at least once every thirty minutes, and you should keep this up for at least a week.

Break it down. Write it down. These two techniques are very straightforward. But don’t let that fool you: These are powerful and effective productivity techniques that allow you put an end to procrastination and help you get started to achieving your goals.

How many of us continue to go to networking events and exchange business cards only to bring them back and put them in a box, in a pile on your desk or even in a drawer? Well, it’s time that stopped! These little gems could be the pathway to your success but only if we get them working for us.

How can a stack or box of business cards work for me??

It’s time to start thinking outside of the business owner box and start thinking like an entrepreneur. If we constantly make contact with other professionals and we only see them at these events, then the relationships we think we have created are not really doing us any good. Like most of us, we exchange cards because we have the intention of keeping in touch but somehow we seem to fall into the routine and they go nowhere; we were there. I recently attended a Dave Lindahl event and met a lot of new people but also ran into several people that we have met at other events and although we exchanged cards and info several events ago, we still seem to only talk at the events. I had a rather full schedule of lunches and dinners and the conversations were awesome which pushed me to do something more to stay in touch.

Let’s take those same professionals and we input all of their info into a database so we can stay in contact with them, this increases our chances of doing business with them dramatically. Let’s say we send out a newsletter monthly or we send out a notice to let everyone know what we are doing in the industry like what deals we have done or what’s coming up or even just a simple email to say “how have you been”, now we are keeping our name in front of them on a regular basis. If your newsletter has good content then you will have people that will actually look forward to it coming.

This is made very easy to do now with internet companies like Constant Contact, iContact, Mail Chimp….and the list goes on. These companies allow us to do email blasts out to a large list of contacts simply by doing one template. We all get emails from services like this some of us just don’t realize it. This now changes the way we can utilize these valuable contacts we have made through all of this networking we have done. These services are fairly inexpensive for the return you can expect to receive by keeping your name in front of your contacts on a regular basis.

If you put this simple practice to work for you and do it regularly, you will find that you will start to do more business with these valuable contacts just because they remember your name and the connection you had at the networking events that lead to the exchange of cards initially. By following this simply practice you can’t help but increase your success, after all, one of the main reasons you exchanged those cards to begin with was the potential to do business with them. I have increased my business since we have started sharing with our contacts. Good luck and see you at the TOP!!!

People often ask me how I became successful in that six-year period of time while many of the people I knew did not. The answer is simple: The things I found to be easy to do, they found to be easy not to do. I found it easy to set the goals that could change my life. They found it easy not to. I found it easy to read the books that could affect my thinking and my ideas. They found that easy not to. I found it easy to attend the classes and the seminars, and to get around other successful people. They said it probably really wouldn’t matter. If I had to sum it up, I would say what I found to be easy to do, they found to be easy not to do. Six years later, I’m a millionaire and they are all still blaming the economy, the government, and company policies, yet they neglected to do the basic, easy things.

In fact, the primary reason most people are not doing as well as they could and should, can be summed up in a single word: neglect.

It is not the lack of money – banks are full of money. It is not the lack of opportunity – America, and much of the free World, continues to offer the most unprecedented and abundant opportunities in the last six thousand years of recorded history. It is not the lack of books – libraries are full of books – and they are free! It is not the schools – the classrooms are full of good teachers. We have plenty of ministers, leaders, counselors and advisors.

Everything we would ever need to become rich and powerful and sophisticated is within our reach. The major reason that so few take advantage of all that we have is simply neglect.

Neglect is like an infection. Left unchecked it will spread throughout our entire system of disciplines and eventually lead to a complete breakdown of a potentially joy-filled and prosperous human life.

Not doing the things we know we should do causes us to feel guilty and guilt leads to an erosion of self-confidence. As our self-confidence diminishes, so does the level of our activity. And as our activity diminishes, our results inevitably decline. And as our results suffer, our attitude begins to weaken. And as our attitude begins the slow shift from positive to negative, our self-confidence diminishes even more… and on and on it goes.

So my suggestion is that when giving the choice of “easy to” and “easy not to” that you do not neglect to do the simple, basic, “easy”; but potentially life-changing activities and disciplines.

Multifamily property owners who embark on energy efficiency retrofits before talking to their lender will be disappointed. Conventional lenders generally do not recognize projected, non-historical, boosts to NOI resulting from energy savings measures that have not yet been implemented. Down the road, however, that skepticism in the financing industry may begin to change, as more scientific data becomes available to prove the efficacy of green upgrades.

Deutsche Bank Americas Foundation (DB) took a step forward with respect to the evolution of green financing when it initiated a study “to encourage the financial industry to scale up financing of building energy-efficiency retrofits.” Commissioned by DB and the community development collaborative Living Cities (LC), Steven Winter Associates and HR&A Advisors prepared a report entitled “Recognizing the Benefits of Energy Efficiency in Multifamily Underwriting.”

The study has tried to address “a key bottleneck for private capital: the lack of confidence in energy savings for lenders to underwrite loans against,” states DB in a forward to the report. DB noted that New York City multifamily buildings have undergone green retrofits for decades but have relied on public subsidies, “a limited resource.” If successfully deployed, private capital could prove transformational.

“The purpose is to translate the world of energy efficiency into financing. Energy-efficient retrofits have been taking place for a time, but no one in the banking community has taken that into consideration when lending,” comments Jason Block, senior mechanical engineer at Steven Winter Assoc. Steven Winter focused on analyzing the building systems of the portfolio under study, while HR&A concentrated on the financing aspects of the report.

Sam Marks, vice president at DB, says that the company’s goal to “scale up” green retrofits creates an alignment between carbon reduction and DB’s long-time community development goals. “Retrofits reduce carbon emissions, and at the same time they can make multifamily/affordable housing better places to live for the residents. A more efficient building is also more comfortable, healthier, and more financially stable for the long run.”

The study compared projected versus actual savings as a result of energy-efficient retrofits in 231 mostly affordable projects representing over 21,000 units (91 percent of them affordable) in the five boroughs of New York City. The database was obtained from the New York State Energy Research & Development Authority (NYSERDA) and the federal Weatherization Assistance Program (WAP). All the projects had participated in multifamily programs sponsored by either of these two programs, which provided a ready database of projects that had completed retrofit programs. “In New York, there is a good pool of projects that have undergone retrofits. Few had taken the time to go back to the buildings to see how well they did compared to their projections,” explains Block.

The study found that across the portfolio, buildings reduced their fuel consumption by 19 percent and electric consumption by 7 percent as a result of the upgrades. On average, buildings recorded $240 per unit in fuel savings and $50 per unit in common area electricity savings. Actual savings were 61 percent of projected savings for fuel-related upgrades, while the actual electrical savings were a statistically negligible percentage of projected electrical savings. Green retrofits included boiler replacements, boiler control improvements, windows weatherization, lighting retrofits and roof insulation installations.

Block suggested a few reasons for the greater fuel savings compared to electricity savings. Light bulbs may not be uniformly installed. And electricity use experience continually greater loads over time as more appliances are plugged in, thus reducing any apparent electricity savings from electrical-related green retrofits. In addition to greater savings on the fuel side, the study also concluded that fuel savings tend to be more reliable than electricity savings in terms of meeting projected savings. “We recommend that banks lend against fuel, not electricity, savings,” says Block.

Another conclusion was that the more energy that is used by a property initially, the greater the savings subsequent to the energy upgrades. “There is a strong correlation between how much energy is used before the work and how much the property will save,” says Block. The reason that savings are greater could be that there is more room to cut energy costs if the property is already overusing energy. (And it is generally believed that affordable housing tend to use more energy than market-rate housing.)

The DB/LC report recommends some steps for lenders to take in underwriting against fuel savings projections, including: benchmarking the building’s fuel usage with its peers’ to determine whether opportunities exist for fuel savings; developing procedures to ensure the quality of energy audits; lending to the anticipated savings recommended by the report based on a building’s pre-retrofit fuel use; and ensuring effective implementation and management.

According to Block, the study is applicable only to New York City buildings, which may have different building systems compared to other parts of the country, and cannot be extrapolated to other cities. However, “the methodology is transportable,” he says, and it is hoped that similar studies would be conducted for other markets.

As for the New York City market, Living Cities made a follow-on grant to the New York City Energy Efficiency Corp. (NYCEEC) to take the next step after the completion of the study. NYCEEC, whose mission is to support New York City’s green energy goals by developing “an energy efficiency retrofit financing market for private building owners,” is working with public sector entities to develop new energy-efficiency multifamily mortgage products in a pilot program that incorporates the lessons learned from the DB/LC study. Among its current offerings, NYCEEC provides direct loans to building owners to finance energy-efficiency retrofits.

Unfortunately, NYCEEC’s program also applies only to New York City buildings. And overall, the private lending market appears to be still uninvolved at this point. “There are some really compelling lessons learned from our study, although we haven’t seen the private market take up the charge to incorporate the lessons into their underwriting yet,” says DB’s Marks. The NYCEEC pilot program and DB/LC model might be important first steps in leading to the day when private lenders will feel comfortable taking into account future energy savings when sizing the loan.

The Lenders’ Perspective: Potential Benefits of a Greater Focus on Energy Efficiency

McLean, Va.-Freddie Mac announced its highest-producing multifamily mortgage sellers of 2012. These are the lenders who transacted the most financing volume with Freddie Mac. Through these and other lenders, the company settled a record $28.8 billion in new multifamily volume last year, comprising 435,000 rental units and resulting in over $21 billion in mortgage securitizations.